Understanding the $8,000 Tax Credit - First Time Home Buyers

Understanding the $8,000 Tax Credit - First Time Home Buyers

Who Qualifies for this Loan ?  A first time home buyer is someone who has not owned a principal residence. For married buyers both you and your spouse must be "first time buyers". For unmarried joint purchases, either party can be a "first time buyer" it's not necessary that both are "first time buyers".

What type of  Residence qualifies? It must be a principal residence. Including single family homes, condos, mobile homes and even multi-family homes if they are owner occupied. Rental properties and Vacation homes do not count as Principal Residence.

Home Purchase dates: In order to qualify the home must be purchased between January 1st 2009 and December 1, 2009.

How much of a Tax Credit can you receive? The tax credit is equal to 10% of the homes purchase price up to a maximum of $8,000.  In order to receive the $8,000 the home price must be at least 80,000. Less than that and he tax credit will be equal to 10% of the sales price.

Are there income limits for the Tax Credit?  First Time Home Buyers with an income of $75,000 or less get the full benefit of the tax credit. The tax credit is gradually reduced for those earning between $75,000 and $95,000. Home buyers with annual income over $95,000 will not qualify for this tax credit.
Married couples earning under 150,000 will qualify for the full benefit.

How does the Tax Credit work?  If you normally receive a refund the entire $8,000 will be added to your refund *if you qualify for the whole amount*  For example you're owed $1,000 from the IRS you will receive a check for $9,000. 
If you owe the IRS $1,000 it will be deducted and you will receive a refund of the balance $7,000.

Does the Tax Credit need to be paid back?   Only if the home is sold within three years of the purchase, the entire amount of the credit is recaptured on the sale.  Exceptions  can be made such as death or divorce.

Please be aware that this information is being given as a general overview of the 2009 tax credit and if you want more specific information about this credit, you should consult with a qualified tax advisor.